Amazon Launching Virtual Currency for Kindle Apps, Games

As if Amazon didn’t have enough irons in the proverbial fire, the online giant up and decided to launch its own virtual currency.

But these “Amazon Coins” aren’t a competitor to Bitcoin, an online currency based on an open-source protocol and used for a variety of transactions worldwide; at least for the time being, Amazon is restricting the use of its virtual currency to buying apps and games for the Kindle Fire, its Android-based tablet.

One Amazon Coin is worth one U.S. cent. Amazon plans on making its virtual currency available only to U.S. customers at launch; it hasn’t given any guidance on when international customers might have the chance to use the Coins. Amazon suggested in a Feb. 5 posting on its Mobile App Distribution Blog that the Coins system will launch sometime in May, and that it will be “giving out tens of millions of dollars worth of Coins.”

Amazon will still pay developers 70 percent of revenues earned from sales of apps and games, whether the customers use Coins or plain ol’ cash. However, those developers interested in making their wares available for Coin purchases will need to make sure any new apps or app updates are submitted and approved by April 25, which will give them “the best chance of being available for Coins purchases at the launch of the program.”

Amazon’s Kindle tablets and e-readers, most notably the full-color Kindle Fire, serve one basic purpose: pipe Amazon content such as e-books and streaming media directly to customers. The latest-generation Kindle Fire features local storage starting at 16GB, customized Facebook and Skype apps, Whispersync for Games (which stores gaming information in the cloud), and a retooled email hub. Amazon also sells its hardware at a very competitive price vis-à-vis its rivals, willing to sacrifice its front-end margins in order to place what essentially amounts to a digital vending machine in the hands of its customers.

While Amazon is notoriously reluctant to break out its sales numbers for its Kindle devices, there are indications that such a strategy is working: analytics firm Localytics recently suggested that the Kindle Fire owns 33 percent of the global Google Android market, well ahead of the Samsung Galaxy, Google’s Nexus 7, or Barnes & Noble’s Nook.

Although its questionable whether a virtual currency will hold more people to a particular platform—particularly if the currency in question trades at parity with actual dollars—Amazon could have a game-changer on its hands if it expands its Coins’ redeeming value beyond Kindle software to physical goods.

Author

Nick Kolakowski has written for The Washington Post, Slashdot, eWeek, McSweeney's, Thrillist, WebMD, Trader Monthly, and other venues. He's also the author of "A Brutal Bunch of Heartbroken Saps," a noir thriller.